Trade What You See

LARRY PESAVENTO is a forty-year veteran trader who has one of the most extensive trading libraries in the world. He operates a Web site, www.tradingtutor.com, which provides market analysis for subscribers. Pesavento speaks regularly at trading conferences and is a private trader for a large hedge fund. The pattern recognition approach he uses eliminates the random nature of market action. LESLIE JOUFLAS has been trading for over ten years and went professional in 2000. She coaches and tutors trading students as well as moderates and runs www.tradingliveonline.com. Jouflas also trades privately managed money as well as her own account.

• Preface xiAcknowledgments xvAbout the Authors xviiPart I Introduction to Trading with Pattern RecognitionChapter 1 Opening Thoughts 3How to Use This Book 3Succeeding or Failing in Trading 4Steps to Take for Successful Trading 7Chapter 2 Geometry of the Patterns and Fibonacci Ratios 9History of Geometry in the Markets 11Fibonacci Ratios 13Applying the Fibonacci Ratios 15Summary 18Chapter 3 Harmonic Numbers and How to Use Them 19Where the Term Harmonic Numbers Originated 19Defining a Harmonic Number 20Vibrations in Price Swings 22Repetition in Price Swings 24Finding Harmonic Numbers 28Harmonic Numbers Found in Other Markets 34Part II The Price Patterns and How to Trade ThemChapter 4 The AB=CD Pattern 37History of the AB=CD Pattern 37AB=CD Pattern Description 39AB=CD Pattern Structure 39Important Characteristics of the AB=CD Pattern 42CD Leg Variations 43Slope and Time Frames 46Psychology of the AB=CD Pattern 48Trading the AB=CD Pattern 49Chapter 5 The Gartley “222” Pattern 53History of the Gartley “222” Pattern 53Gartley “222” Pattern Description 55Gartley “222” Pattern Structure 56Important Characteristics of the Gartley “222” Pattern 57Psychology of the Gartley “222” Pattern 59Trading the Gartley “222” Pattern 60Chapter 6 The Butterfly Pattern 67History of the Butterfly Pattern 67Butterfly Pattern Description 69Butterfly Pattern Structure 70Important Characteristics of the Butterfly Pattern 71Psychology of the Butterfly Pattern 72Trading the Butterfly Pattern 73Chapter 7 The Three Drives Pattern 81History of the Three Drives Pattern 81Three Drives Pattern Description 82Three Drives Pattern Structure 83Important Characteristics of the Three Drives Pattern 84Psychology of the Three Drives Pattern 84Trading the Three Drives Pattern 85Chapter 8 Retracement Entries and Multiple Time Frames 91Fibonacci Retracement Entries 92Fibonacci Retracement Pattern Structure 92Trading the Fibonacci Retracement Pattern 95Opening Price Retracement Setups 98Market Setup for the Opening Price Retracement Trade 99Trading the Opening Price Retracement Setup 100Multiple Time Frames 103Chapter 9 Classical Technical Analysis Patterns 113A Brief History of Technical Analysis 114Basics of Technical Analysis 115Double Bottom and Top Patterns 115Head and Shoulders Pattern 120Broadening Top and Bottom Patterns 126Chapter 10 Learning to Recognize Trend Days 131Identifying a Trend Day 132Patterns Found on Trend Days 135Fibonacci Ratios on Trend Days 138Controlling Risk on a Trend Day 140Trading a Trend Day 141Part III Essential Elements of TradingChapter 11 Trade Management 149Thinking in Probabilities 150Warning Signs and Confirmation Signs 151Money Management 155Chapter 12 Using Options with the Fibonacci Ratios and Patterns 161Call and Put Options Defined 161Factors That Influence the Price of an Option 162Controlling Risk with Options 163Examples of Using Options with Extension Patterns 164Chapter 13 Building a Trading Plan 167Daily Trading Plan 168Trading as a Business 174Disaster Plans 177Summary 181Chapter 14 Daily Routines 183Trade Preparation 183Mental Preparation 187Physical Preparation 188Appendix 191Index 195

"…should prove valuable to those already practicing technical analysis and who want to take their trading to the next level." (Investors Chronicle,  Friday 28th March 2008)